Low Cost Carriers effect of entry on airfare and passenger traffic within US Airline Industry (original) (raw)

This study analyzes how the presence of a low cost carrier is going to affect the airfares and the passenger traffic. The present structure of the US carriers market is also overviewed, in order to determine the share of incumbent carrier market power. A number of factors such as distance, number of passengers, market concentration, income, low cost presence, type of travel (leisure or not) playing an essential role in analyzing ticket fares and helped in providing a reliable outcome. Most of the findings in previous research reveal that the entry effect of a low cost carrier decreases the airfares and leads to an increase in the passenger traffic. The regressions essentially determine if the fares strategy is different taking into account the presence of a low cost carrier on a specific route. Based on fixed effects and an instrumental variable approach over 2000 to 2014 it can be concluded that the entry of low cost aviation companies do indeed diminish the airfares though at a lo...